The Innovation Recession and the Way Out

By Derek Thompson

Silicon Valley analyst-cum-slideshow extraordinaire Mary Meeker has
put together a very interesting presentation on the state of the
Internet, which we've printed in full on our Technology page. You should check it out.

What caught my eye in particular were two graphs. The first shows the
pace of penetration for AM radio, TV, Internet, and smartphones. The
adoption rate of today's technologies looks remarkably similar to
yesterday's...
... Meanwhile, the second graph shows the accelerating pace of adoption
for Apple's last three products. The first iPad sold much faster than
the first iPhone, which sold much faster than the first iPod.

These graphs reminded me of David Leonhardt's very smart and very scary column
on America's crisis of good ideas. Whereas in the 1930s, he argues, the
country was seeing secular technology gains that paid off in the 1950s
(the invention of TV, nylon stockings, refrigerators, and washing
machines; the development of faster rail and smoother roads), he worries
that the pace of innovation is slowing down today. The rate at which
new companies are created has been falling. Capital investments outside
of real estate have declined for a decade. Meanwhile, health care is
gobbling up resources at an alarming rate and we don't know how to slow
it down.

Leonhardt writes:

The economy has not done an
especially good job of building its productive capacity. Yes,
innovations like the iPad and Twitter have altered daily life. And, yes,
companies have figured out how to produce just as many goods and
services with fewer workers. But the country has not developed any major
new industries that employ large and growing numbers of workers.

I think this is right, and I tend to be as gloomy as Leonhardt
about the intractability of our most serious problems, like middle class
wage stagnation and rising health care costs. But here's a case for
optimism. The most exciting technologies available to your average
consumer are infants. Literally. A child born on the day the first
iPhone was released wouldn't yet be in kindergarten. Television was
invented in the 1930s and didn't hit 50% penetration rate until 1955. It
didn't become the predominant source of movie studio revenue until the
latter half of the 20th century. It didn't give birth to what is now a
$10 billion video game industry until even later.

We don't know if the mobile economy will become as dynamic as the
late-1800s railroad economy, if it will employ as many people as the
1920s auto
industry, or improve productivity as much as the 1990s Internet
revolution. We simply have no idea. But what smartphones and tablets
have done is to put something more powerful than radio or television
into the hands of consumers at an even faster rate radio and television
penetrated the market. That is cause, I think, for some excitement, and
even optimism.